This applies the ratio, expressed as a fraction, to net Australian assets H represents the net Australian assets funded by debt and equity, as calculated at H in Worksheet 36: Non-ADI financial inward investor's step 2

Step 5.8: If the entity does not have any associate entities that are non-ADI outward investors or inward investors, insert 0 (zero) at GG on Worksheet 40: Non-ADI financial inward investor's step 5

Otherwise, calculate the average value of the entity's associate entity excess amount (refer to the method statement in 820-920 of the ITAA 1997), insert the amount at GG on Worksheet 40: Non-ADI financial inward investor's step 5

This increases the worldwide gearing debt amount by the average associate entity excess amount

Note: If the entity does not have any associate entities that are non-ADI outward investors or non-ADI inward investors, the average associate entity excess amount is zero

Refer to section 820-920 of the ITAA 1997 for the method statement on how to calculate this amount.

If the entity has no associate entities that are non-ADI outward investors or non-ADI inward investors, do not complete this step and show zero at GG on Worksheet 40: Non-ADI financial inward investor's step 5.

If the entity’s adjusted average debt is equal to or less than this amount, the entity is not disallowed any debt deductions under the thin capitalisation rules. However, if the entity’s adjusted average debt is more than the worldwide gearing amount, you can choose to use the arm’s length debt amount under step 3 or safe harbour debt amount under step 2.

If you do not wish to calculate the arm’s length debt amount, you can use your worldwide gearing debt amount as your maximum allowable debt amount and debt deductions will be disallowed on this basis – see step 6.

How to do the fifth step of your calculations to check if you meet the requirements under the thin capitalisation rules if you are a non-ADI financial inward investor.

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